Tourism sector needs PPP development

By Cheranka Mendis

Although tourism is considered an industry that works on a comfortable Public-Private Partnership (PPP) basis, there is a policy gap in facilitating PPPs on a local and provincial level.

At a discussion organised by the Sri Lanka-Poland Business Council last week, tourism officials admitted that there was no structure in place to smoothen the progress of forming PPPs on a local or provincial level to fast forward and implement more tourism projects in the localities.

Tourism is said to be a devolved subject in provincial councils and has the power to promote attractions within the provinces, but has no agency to form PPPs between interested parties and the State.

Vacuum

Director of International Relations of the Sri Lanka Tourism Development Authority (SLTDA) Malraj Kiriella stated that although provincial tourism authorities were taking initiatives to develop PPP models, it was not very visible right now. However, he admitted that there was a vacuum in the system where PPPs are concerned.

“There is no agency working towards PPP, to frame it and the models, to get the best case studies of the world and then form our own. To implement the PPP models, knowledge is also lacking,” Kiriella said.

“No one is profiling potential opportunities, inviting bids and seeing whether it’s good, bad, environmentally friendly or culturally right. A dedicated unit for this would perhaps bring better results,” he said.

With the ‘Mahinda Chinthana’ policies looking at increasing private investment from 18% to 22% in the near future, the leisure and tourism sector has been identified as a main area in PPP development. Kiriella listed out the premier PPP between tourism and the State – Sri Lanka Tourism Development Authority, Sri Lanka Tourism Promotion Bureau, Sri Lanka Convention Bureau and the Hotel School, which line up under the Economic Ministry under Tourism Act No. 38 of 2007.

“Tourism hotel, resort and facility development where the Government leases land to the private sector to develop it, hotel classification and standard maintenance where according to a PPP model the private sector sits on the classification of hotels, marketing promotion such as participation at trade fairs and other promotions by both the State and private sector are some of the successful present PPPS in the industry,” he said.

The Bentota sewerage treatment plant where land was given to the private sector, which in turn has invested and now operates the services, the Colombo city tour and the tourist friendly tuk-tuk, which also runs on a partnership, were put forward as examples.

“SLTDA is going to boost its revenue within the next 10 years to a six fold increase. We are now targeting the development of attractions to make it a more diverse destination,” he said.

Opportunities for future PPPs

SLTDA has identified 45 tourism zones and the main resort development will take place in the 14-island periphery of Kalpitiya across 4,000 acres, Kuchchaveli and Passikudah with expectations to add 5,000 and 800 rooms respectively and Arugam Bay with 1,000 rooms.

Opportunities for future PPPs lie in roads, transportation and air connectivity and basic amenities such as sewerage, attraction development, building of visitor facilities, HR development, quality enhancement and green practices.

“The Government is facing a constant challenge to find sufficient funds to maintain and develop infrastructure to support growing populations. It is also challenged by the demands of increasing urbanisation, rehabilitation requirements of ageing infrastructure, the need to expand network to new population and goals of reaching previously un-served areas. Infrastructure maintenance is usually done on an operational deficit which is covered only through subsidising, thus constituting an additional drain on public resources,” President of the Tourist Hotels Association of Sri Lanka Anura Lokuhetty said.

“There will be long-term cost increase if a proper PPP in not place. Reform activities and sustainable development will then follow,” he added.

Capacity development

Capacity development, an essential in tourism, should also take place on a PPP basis. Lokuhetty warned that with the current trend, he is worried that the requirements needed would not be fulfilled unless changes in terms of capacity improvement are made.

Currently the leading markets for tourism are India, UK and Germany. But with the 2.5 million plans, it’s absolutely necessary to look at intra-regional development of tourism, he noted.

“With increase of fuel prices and carbon emission issues, long haul travel will be affected. But Asia with a high growth of 13% in 2010 will be the most popular continent – the time has come for heavy concentration on intra regional development.”

According to Lokuhetty, as present there are 15,000 formal and 7,000 informal rooms in the country, which is estimated to grow to another 20,000 to be built before 2016.

Putting forth industry observations in the new direction, Lokuhetty observed that the SLTDA was now moving away from the original plan of managing large projects like Kalpitiya, Passikudah, Kuchchaveli, Deduwa, etc. Investors are given greater freedom and flexibility through the new land policy of 99-year leases.

“We think the new initiatives the Government should take are in terms of encouraging more hotels to be built, by providing land at more attractive prices to make the projects more viable. Now it’s 20 million an acre – 10 acres is 200 billion. It’s not very viable.”

“We urge the Government to come up with another package. Maybe you can make one where you value the land, ask for a deposit and collect that money over a period of time. Otherwise I don’t think many will invest after buying land at that price,” he said.

Private investors are also encouraged to undertake providing of common infrastructure such as sewerage and so on. “In Passikudah each hotel cannot have a sewage treatment plant. Infrastructure should be set up by the private sector or public sector and charges should be according to the size of the hotel.”

The Hotel School should be developed as a franchise model and civil aviation rules should be relaxed for greater participation of private sector,” he added.

Pix by Upul Abayasekara